Pella Chronicle

January 12, 2013

Council approves second reading of electrical rate amendment

The Chronicle

Pella — During the January 2 Pella City Council meeting, the second reading of an ordinance amending electrical rates was approved by council.

As reported in last week’s Pella Chronicle, on October. 23, 2012, the City Council reviewed the Electrical Cost of Service Study performed by Missouri River Energy Services (MRES). The Electrical Cost of Service Study analyzed the cost of serving each of the utility customer classes and recommended an electrical rate structure which was based on the cost to serve our customers. On December 4, 2012, the City Council reviewed a new energy cost adjustment (ECA) formula which accounts for fluctuations in the costs of the City's power supply, fuel for the diesel generating plant, and transmission expenses. After discussion, staff was directed to proceed with amending the electrical rates.

Comparison of Proposed Electrical Rates to Current Electrical Rates

Overall, there will be no increase in revenues received by the City as the proposed electric rates are estimated to provide the same amount of revenue as our existing rates. However, based on the Cost of Service Study, there will be increases and decreases in the respective classes to adjust to the cost to service each class.

Energy Cost Adjustment (ECA)

The ECA is intended, to account for fluctuations in the cost of the City's power supply, fuel for the City's diesel generating plant, and transmission expenses. It is important to note, staff believes the ECA will be more stable in the future and as a result we are proposing an ECA formula which would require Council approval to increase the ECA above the baseline energy cost of 6.8 cents per kWH as identified in the Cost of Service Study. As a result, any changes desired by Council would be made in November for the upcoming calendar year and would be based on projected energy costs. Listed below is the proposed ECA formula:

A+B/C-$0.068= ECA (Factor to apply to monthly bills.)

A = Annual projected power and transmission costs for the next calendar year.

B = Actual cost of fuel for local generation in excess of $45,000.00 in the previous year.

C = Annual projected kWh. $0.068 = Base Power Cost (Already included in the rate structures).

Proposed Electric Rates

The new electrical rates include a seasonal rate structure in which the rates will be higher in the summer months of June thru August and lower in the spring, fall, and winter months. The reason for this approach is the City's purchase power costs thru Missouri River Energy Services are higher in the summer months which is driven by demands for energy. In addition, power supply costs account for approximately 80% of the electric utility's operating costs. If Council adopts the proposed rates, staff will be providing our customers with information of the new seasonal rates along with strategies to reduce the community's peak electrical demands during the summer months.

If council were to adopt the ordinance for the new electric rates, they would be in effect for utility bills due in April 2013 for March 2013 usage.

A chart of the proposed impact the new rates will have on each of the City’s customer classes and the proposed electrical rates can be found in the January 3 edition of the Pella Chronicle - located on Page 2.